No Irony Intended
President Joe Biden’s climate czar visited Mexico last week to heap praise on Mexico’s President Andrés Manuel López Obrador.
“I see wisdom in his leadership that wants to undo some of the mistakes of the past and help to promote the interests of the people.”
Manuel Bartlett, aka AMLO, explains Mary Anastasis O’Grady in the WSJ, is one of the most notorious “dinosaurs” of Mexico’s one-party state during the 20th century.
Mr. Bartlett is now the director of the state-owned Federal Electricity Commission, or CFE, which is at the center of a dispute with American renewable-energy investors.
Fear and Loathing
What is John Kerry’s job? “… to travel around the world spreading fear about global warming and pressuring countries to adopt the environmental lobby’s agenda,” continues Ms. O’Grady. Although, according to the Spectator, Mr. Kerry is now slumming it flying commercial rather than on his private jet.
Mr. Kerry is good at the former. But while his seven trips to Mexico over 18 months seem to have made him Mr. López Obrador’s new BFF, they’ve done nothing to advance the cause of renewable energy in Mexico.
State-owned oil company Petróleos Mexicanos, or Pemex, according to Ms. O’Grady, is a polluter.
Last week the Mexican daily Reforma reported that about 30% of the output from its refineries is dirty fuel oil, roughly the same as its gasoline output. This compares with about 1.5% of output from U.S. refineries that is fuel oil. Pemex has trouble exporting this high-sulfur residual, so it depends on the CFE as a buyer.
To get there, (ALMO’s) been backtracking on Mexico’s USMCA obligations. Climate-envoy Kerry, who ought to represent U.S. interests, has served as a prop.
Monopoly Power of State-Owned Pemex
Mexico reformed its constitution in 2013 to allow for private investment—foreign and domestic—in energy. In November 2018, then-President Enrique Peña Nieto signed a renegotiated North American Free Trade Agreement, christened the U.S.-Mexico-Canada Agreement. Whereas Nafta did not commit Mexico to open its energy sector, USMCA consolidated the opening Mexico had done unilaterally and prohibits discrimination of investors and service providers.
Under USMCA, Mexico is committed to issue permits to energy producers and allow interconnection with the electricity grid on a nondiscriminatory basis. The independent systems operator is supposed to dispatch the energy used for electricity generation according to its marginal cost. This implies that solar and wind projects go first. Yet to the extent that they displace Pemex, they are unwelcome by AMLO’s government.
To give himself cover for his economic nationalism, AMLO has now pivoted to building his own wind and solar farms. In February he said that four CFE-owned wind projects will be financed by the U.S. I asked the State Department if this was true.
Sounds Like a “Yes”
According to a State Department spokesperson, the U.S. plans “to catalyze and incentivize investments in renewable energy and mobilize climate finance to assist with these efforts.”
Note to Mr. Kerry
Green energy has advanced, but it’s still an intermittent supply, argues Ms. O’Grady.
To make it work requires more private capital in things like battery technology and creative thinking about how to structure future cost-sharing contracts with reliable producers. But AMLO’s attempt to nullify the ground rules under which private green capital has entered Mexico only drives new investment and innovation away.
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